Discussing the latest from Freddie Mac on mortgage rates, residential construction numbers, unemployment and several more positive indicators
As I wrote this, I was watching the inauguration. In the coming years, when I criticize Trump or his administration, I hope you will remember that I also did the same thing for Obama and his minions.
Some people say the glass is half full, some people say it is half empty. I say the politicians and bureaucrats are to blame…
The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for December 2016:
Privately-owned housing units authorized by building permits in December were 0.2% below the revised November rate but 0.7% above the December 2015 estimate.
Single-family authorizations in December were 4.7% above the revised November figure of 780,000. Authorizations of units in buildings with five units or more were at a rate of 355,000 in December.
An estimated 1,186,900 housing units were authorized by building permits in 2016. This is 0.4% above the 2015 figure of 1,182,600.
Privately-owned housing starts in December were 11.3% above the revised November rate and 5.7% above the December 2015 rate. Single-family housing starts in December were 4.0% below the revised November figure but 3.9% above the December 2015 rate. The December rate for units in buildings with five units or more was 417,000.
An estimated 1,166,400 housing units were started in 2016. This is 4.9% above the 2015 figure of 1,111,800.
Privately-owned housing completions in December were at a seasonally adjusted annual rate of 1,123,000. This is 7.9% below the revised November rate but is 8.7% above the December 2015 rate.
Single-family housing completions in December were 0.9% below the revised November rate of 768,000. The December rate for units in buildings with five units or more was 355,000.
An estimated 1,062,300 housing units were completed in 2016. This is 9.7% above the 2015 figure of 968,200.
In the week ending January 14, the advance figure for seasonally adjusted initial claims was 234,000, a decrease of 15,000 from the previous week’s revised level. The previous week’s level was revised up by 2,000 from 247,000 to 249,000. The 4-week moving average was 246,750, a decrease of 10,250 from the previous week’s revised average. This is the lowest level for this average since November 3, 1973 when it was 244,000.
Awesome news and hopefully a sign of what 2017 will be like!
The National Association of Home Builders Remodeling Market Index (RMI) dropped 4 points to 53 from the previous quarter, but remained above the breakeven point of 50, which indicates that more remodelers report activity is higher (compared to the prior quarter) than report activity is lower. Although the RMI declined, it is consistent with levels seen in the first half of 2016. The RMI has been at or above 50 for 15 consecutive quarters.
While it is bad that the NAHB Remodeling Index dropped, you need to look at the big picture. Since the RMI has been at or above positive for such a long time, this blip should not be anything to worry about.
John Fernald, senior research advisor at the Federal Reserve Bank of San Francisco, recently posted his views on the current economy and the outlook as of January 12, 2017:
Recent data confirm that the economy has picked up from its modest pace of the first half of 2016. Indeed, in the third quarter of 2016 GDP growth was revised up from an annualized rate of 3.2% to 3.5%. This rapid pace in part reflected transitory factors such as inventory accumulation and agricultural exports.
Going forward, GDP growth is likely to remain for some time a bit above its long-run trend of 1½% to 1¾%. The fundamentals of consumer spending remain healthy, including solid income growth and strong household balance sheets. And business capital spending is poised to rebound from its weak pace of the past several years.
Employment gains remain solid. The labor market remains near its sustainable, full employment level. The unemployment rate in December ticked up to 4.7%, a touch below our estimate of the natural rate of unemployment of 5%. The December unemployment rate was the lowest end-of-year rate since 2006.
Inflation remains below the Federal Reserve’s 2% objective, but has been gradually increasing towards the target rate since early 2016.
Encouraging news for the economy but remember that as the economy strengthens, the Fed will keep raising their benchmark rate.
Highlights from the latest Beige Book:
- The economy continued to expand at a modest pace across most regions
- Manufacturers reported increased sales
- Labor markets were reported to be tight or tightening
- Employment growth ranged from slight to moderate
- Most reported wages increased modestly
- Pricing pressures intensified
As I said above, an improving economy does mean that it is likely that mortgage rates will increase.
ATTOM Data Solutions, curator of the nation’s largest fused property database, today released an analysis that found that borrowers across the country could potentially save an average of $446 a year under the new mortgage insurance premium reduction set to take effect later this month for loans backed by the Federal Housing Administration.
I have read some reports that Trump will reverse this but whether or not these reports are true is unknown.
Is $446 a year really going to make that big a difference for most home buyers? After all, it is only $37 dollars a month.
If $37 dollars a month makes that big a difference to a home buyer, maybe they need to rethink their budget?
The Architecture Billings Index (ABI) concluded the year in positive terrain, with the December reading capping off three straight months of growth in design billings. The American Institute of Architects (AIA) reported the December ABI score was up sharply from the previous month. This is the largest increase in design services in 2016.
More positive news!
Total U.S. Weekly Rail Traffic Up 2% Compared With Same Week Last Year
The Association of American Railroads (AAR) reported total U.S. weekly rail traffic for the week ending January 14, 2017 was up 2 percent compared with the same week last year
Yet another positive indicator!
Cass Freight Index Report
The December 2016 Cass Freight Index Report came out this week and shipment were up 3.5% YoY but expenditures were down 3% YoY.
Data is beginning to suggest that the consumer is finally starting to spend a little and that with the recent surge in the price of crude, the industrial economy’s rate of deceleration has eased. If the winter of the overall freight recession we’ve been in for more than a year and a half in the U.S. is not yet over, it is certainly showing promising signs of thawing.
I hope Cass is correct that things are starting to thaw!
Economic conditions continued to improve in January, according to the firms responding to this month’s Manufacturing Business Outlook Survey. The indexes for general activity, new orders, and employment were all positive this month and increased from their readings last month. Manufacturers have generally grown more optimistic in their forecasts over the past two months. The future indexes for growth over the next six months, including employment, continued to improve this month.
Yes it is yet another positive report!
Freddie Mac Says Mortgage Rates Decreased for 3rd Consecutive Week
Freddie Mac just released their latest Primary Mortgage Market Survey and it showed that average mortgage rates decreased for the 3rd consecutive week.
- 30-year fixed-rate mortgages averaged 4.09%
- This is down from last week when it averaged 4.12%
- A year ago at this time, 30-year fixed-rate mortgages averaged 3.81%
- 15-year fixed-rate mortgages averaged 3.34%
- This is down from last week when it averaged 3.37%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.10%
Sean Becketti, chief economist, Freddie Mac said:
After trending down for most of the week, the 10-year Treasury yield rose following the release of the CPI report. In contrast, the 30-year mortgage rate fell three basis points to 4.09 percent, the third straight week of declines.
Remember these are the average mortgage rates and you need to talk to the lender of your choice to determine what realistic, possible and best for you!